Indian Assets Hold Steady as Traders Overlook Fitch Outlook Cut

(Bloomberg) -- India’s rupee, stocks and sovereign bonds were little changed after Fitch Ratings cut the nation’s rating outlook to negative, a move largely expected by the markets after a downgrade by Moody’s Investors Service earlier this month.

The S&P BSE Sensex was up 0.3% in Mumbai. The most-traded 6.45% 2029 bond yield was steady at 6.01%, while the rupee was little changed at 76.17 per dollar.

The coronavirus pandemic has significantly weakened India’s growth outlook for this year and exposed the challenges associated with a high public-debt burden, according to a statement from Fitch. The credit assessor retained the rating at BBB-, a notch above junk in line with the other two major raters.

“The impact is muted given the overall risk-on sentiment, and some of these bad news is already priced-in to some extent,” Ashish Vaidya, head of trading at DBS Bank Ltd. in Mumbai.

Fitch’s move comes as India and China are engaged in the deadliest border faceoff in decades, adding a layer of risk premium to Indian assets. The rupee may come under pressure going forward due to the negative factors coming together, but the RBI has enormous firepower to fight any bout of extreme volatility, Vaidya said.

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